Worked example: a $49 home-goods product
You sell a $49 item that costs $14 from the supplier with $5 shipping. Stripe/Shopify Payments takes 3.2% ($1.57), leaving $28.43 of contribution margin. Meta delivers orders at a $22 CAC. Refunds and chargebacks at 4% cost about $0.90 per order on average. Net profit is $5.53 per order — an 11.3% margin. At 300 orders a month that is $1,659, minus $350 of Shopify plan, apps, and tools, leaving $1,309. Your break-even ROAS is $49 ÷ $28.43 = 1.72×, so any campaign reporting under 1.72× ROAS is burning cash even while revenue climbs.
- • A $3 supplier price increase cuts profit per order from $5.53 to $2.53 — a 54% hit from a change most sellers do not notice for weeks.
- • Raising CAC from $22 to $28 wipes out profit entirely. This is why scaling ad spend usually reduces total profit before it increases it.
- • Adding one $19 upsell taken by 20% of buyers adds roughly $2.70 of contribution per order — more impact than most creative testing.
Break-even ROAS is the only ad number that matters
Ad platforms report ROAS against revenue, which flatters low-margin stores. Compute break-even ROAS as selling price ÷ contribution margin and treat it as the floor for every campaign. A store with 58% contribution margin breaks even at 1.72×; a store with 30% contribution margin needs 3.3× — a completely different level of media buying skill for the same product category.
- • Target ROAS should be break-even ROAS × 1.5 if you want a real profit buffer for refunds and seasonality.
- • Blended ROAS (all revenue ÷ all ad spend) is more honest than platform-reported ROAS since iOS attribution changes.
- • If break-even ROAS is above 3×, fix pricing or product cost before touching creative.
The costs dropshipping calculators usually skip
Most profit calculators stop at product cost. In practice, chargebacks (typically $15–25 each on top of the refunded order), app subscriptions, transaction fees on third-party gateways (an extra 0.5–2% on Shopify if you do not use Shopify Payments), customer-service time, and reshipping lost parcels together take another 3–8% off the top. Model your refund rate honestly — a 6% refund rate on a low-margin product can be the entire difference between profit and loss.
Related guides
Long-form playbooks on the same topic, written by the RevenueLab editorial team.
Shopify Conversion Rate Benchmarks 2026: What's Good for Your Vertical
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Read the guideAmazon FBA Fees Explained: A Sellers' Guide to Real Unit Economics in 2026
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Read the guideAmazon FBA Profit Guide 2026: Real Margins After Referral, FBA Fees, PPC, and Returns
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Read the guideFAQ
What is a good profit margin for dropshipping?
10–20% net after ads is realistic for a healthy store; 20–30% is strong and usually implies branded or private-label products rather than generic supplier goods. Under 10% leaves nothing for a supplier price change or an ad-cost spike.
How do I calculate break-even ROAS?
Divide the selling price by your contribution margin (price minus product cost, shipping, and payment fees). A $49 product with $28.43 of contribution needs 1.72× ROAS to break even before overhead.
How much do I need to spend on ads to make dropshipping work?
Budget enough to get 50+ conversions per campaign before judging it — usually 20–30× your target CAC. At a $22 CAC that is roughly $1,100–1,300 of test spend per product angle, which is why testing three products properly costs several thousand dollars.
Does dropshipping still work in 2026?
Generic AliExpress arbitrage largely does not — ad costs have risen faster than the margins those products support. What still works is a differentiated or private-label product with 60%+ contribution margin, faster domestic fulfillment, and a repeat-purchase or upsell path that lifts lifetime value above the first-order CAC.
Should refunds be modeled as a percentage of revenue or of cost?
Of cost plus fees. When you refund an order you usually lose the product cost, the shipping you already paid, and the non-refundable portion of processing fees — not the full sale price, since the revenue was never yours to begin with. This calculator models it that way.
How this calculator is built
Independently maintained
Written by Sam Doshi and the RevenueLab editorial team. We don't sell the data feeds this tool is built on.
Sourced from primary data
Benchmarks come from public AdSense / Stripe / IRS disclosures and reader-submitted data — never third-party "$X per view" claims. Full methodology.
Last editorial review
Reviewed on a rolling quarterly cycle. Dated reviews are published on the methodology record for each calculator.
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See our editorial policy and disclaimer. Results are estimates, not advice.